Kieran O'Donnell (Limerick East, Fine Gael)

I concur with everything Deputy Bruton said. Today is a landmark day for Ireland and the Dáil, as we try to put in place a scheme that will work. We need to protect the taxpayer, bring liquidity back into the economy, ensure that the recession is not prolonged and introduce proper controls to the operation of the banking sector. The scheme being introduced will give wide-ranging powers to the Minister, the Government, the Financial Regulator and the Governor of the Central Bank. How will those powers be used? Will they be used to good effect? Is this phase 1 or phase 2 of the scheme? Quite simply, there is a cancer at the heart of the banking system. The guarantee scheme is, in effect, a form of surgery on that cancer. Further treatment will be needed, however, in the form of recapitalisation. It is important to cleanse the banking sector of its inherent flaws, such as a lack of regulation. How does the Minister propose to deal with the recapitalisation of the banks?

Two issues arise in respect of the charge mentioned by Deputy Bruton. The charge appears to be based on the cost to the State rather than the cost to the banks. We propose that a charge of €1.5 billion be imposed on the banks in return for the guarantee. The charge we suggest, which is based on market rules, will be 0.5% on wholesale deposits and 0.25% on retail deposits. It is driven by the market. It will provide a return. The approach proposed by the Minister would do no better than break even.

The scheme provides that the levies imposed on the banks will comprise a fund. If there is any balance left in the fund after the moneys are spent, it is proposed to transfer it to the Exchequer. The fund should be at its full limit by the time this scheme comes to an end. The entire fund should not be used to help the banks. That would cost the taxpayer. The taxpayer should not suffer a financial liability in respect of this scheme. That is absolutely critical.

Section 36 of the scheme sets a maximum requirement for the amount of money the banks put into the economy. It does not set a minimum requirement. The scheme that has been established in England requires the banks to match their 2007 lending levels. No such comfort is being offered to business people in Ireland. The banks are not being required to provide liquidity to their business customers. The Minister, Deputy Brian Lenihan, needs to give some reassurance in that regard. Will he provide for a minimum requirement?

Section 32 of the scheme does not provide for an absolute compulsion on the banks to appoint a director. It states that they must take "all reasonable steps" to appoint a director. It does not say they "must" appoint a director. The Minister needs to use his power under the legislation we passed two weeks ago to ensure that the scheme requires directors to be appointed. It seems that no such requirement is provided for. The legislation may have to be changed. In the case of Aer Lingus, the Government's nominees to the board of directors were useless, in effect, as they answered to the shareholders rather than to the Government. It is critical that we ensure the directors are answerable in this instance. They need to operate on behalf of taxpayers as a watchdog. The scheme that has been set out has a weakness in this respect.

Section 23 of the scheme provides that the Minister shall come before an Oireachtas committee within six months of the scheme coming into operation. I suggest that it is critical that the Minister appears before the Joint Committee on Finance and the Public Service within a few weeks of the scheme getting up and running. We are talking about the future of the banking system, the future of business and the future of Ireland, Inc. We need to get this right. The Minister needs to explain how he proposes to proceed during phases 1 and 2 of the scheme.

Fine Gael has taken a leap of faith in this House by supporting the Government's decision to establish a guarantee scheme. The wide-ranging powers the Government has given itself must be used judiciously to protect taxpayers' money. The taxpayer cannot pay for this scheme. The banks must pay. The Government must consider the entire issue of recapitalisation. This is phase 1 of the scheme. We must move on to phase 2. The Financial Services Authority in the UK has made it clear that the banks need to come clean on their bad debts. When the Financial Regulator appeared before the Joint Committee on Economic Regulatory Affairs last week, he said that loans worth €39 billion have been given to developers. He said that €24 billion worth of those loans was underpinned by other assets, including property, while €15 billion was underpinned by the underlying assets. There is a problem in that. We need to take up the floorboards and investigate.

I welcome the fact that extra supervisors are being appointed by the Financial Regulator. They must be of a top calibre and must know their terms of reference. They must come back to us and this must work.

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